Why does the presence of a capitalist system affect a nation’s perspective on corporate governance?

Corporate governance has become an issue of concern not only for U.S. corporations, but also for corporate entities around the world. With the globalization of business, a corporation’s bad acts (or lack of control systems) can have far-reaching consequences. Different models of corporate governance exist, often depending on the degree of capitalism in the particular nation. In the United States, corporate governance tends to give priority to shareholders’ interests. This approach encourages significant innovation and cost and quality competition. In contrast, the coordinated model of governance that prevails in continental Europe and Japan considers the interests of so-called stakeholders— employees, managers, suppliers, customers, and the community—to be a priority.